Where/how do I enter my HSA contribution and my employer's HSA contribution for Ohio taxes?

[dgremler]

I was told by an accountant that I am currently NOT getting credit in TurboTax for the Healthcare Savings Account (HSA) contributions that I made (for 2021 taxes).  My W2 from my employer reports the total combined contribution into my HSA account in 2021; in my case my employer contributed $1,000 for my HSA for 2021, and I contributed the rest.  How/where can I tell TurboTax what MY contribution was for 2021?  If I understand correctly, my contribution to the HSA would reduce my state taxes if I can report it to TurboTax.

[RaifH]

Your employer contributed $1,000 which should show up in Box 12 of your W-2 with a code W. This will automatically carry over into the system. If you made an additional out-of-pocket contribution, this can be entered into TurboTax following these steps:

1. Enter your W-2 with the Code W in Box 12.
2. This should have opened an area on your tax return for HSAs. If you do not see it, go to Federal > Wages & Income > Less Common Income > 1099-SA, HSA, MSA and click Start/Revisit.
3. Select HSA.
4. If you made any withdrawals from your HSA, you should receive a 1099-SA and answer Yes to Did you use your HSA to pay for anything in 2021? Otherwise, select No.
5. Assuming you did not inherit this HSA, select No.
6. Under Let's enter your HSA contributions your employer amount should already be in there from the W-2. Enter the additional contributions you made in the Any contributions you personally made box. 
7. Answer the questions on the next two screens, then make sure you answer the question related to your HDHP correctly on the next screen.

Depending on your age and whether your HSA is only for yourself or family coverage, TurboTax will determine if you exceeded your contribution limit as well as give you a deduction for any out-of-pocket contribution.

If you contributed through your work, that amount should be included in the amount that is in Box 12 of your W-2 and you already received the tax benefit from that contribution because it was contributed using pre-tax dollars.

[dgremler]

Thank you for this information.  It was very helpful.  Unfortunately, on the 8889 form, TurboTax does not like it that I have overridden the 9A entry...since my employer reported the COMBINED amount of HSA contributions (mine and my employer's) in box 12 of the W-2 (and NOT just my employer's contribution), I have replaced that value with $1,000.  (This 9A entry is asking for "the employer contributions reported in Box 12 of Form W-2 (code W)".)  Every time I run an error check TurboTax tells met that it doesn't like it that I have accurately reflected my employer's contribution to my HSA on the 8889 form.  It tells me "Form 8889-T: Line 9-a should not be overridden and changed for Electronic Filing.  Using an override can prevent..."  So, how do I handle this?

[RaifH]

If I'm understanding correctly, the $1,000 reported on your W-2 includes both employer contributions and contributions you made, I assume through diverting money from each paycheck into your HSA. Regardless of whether it was funded by your employer as some kind of match or benefit or by you as a voluntary contribution to your HSA, it is reported the same way on your taxes, on your W-2 as Code W. 

Either way, it got there before the contribution was taxed. TurboTax is trying to differentiate between a contribution was with pre-tax dollars or a contribution paid out of pocket with money that has already been taxed. If it is the latter, then you would receive a deduction for the contribution. If the contribution was pre-tax, then you already got the deduction because you are not being taxed on that income. 

If the Code W on your W-2 is not correct, then you would need a corrected W-2 from your employer that only has their contributions. This would be the case if you received your paycheck, then deposited a portion of it into your HSA.

If your employer handled your personal contribution by sending a portion of your pre-tax income to the HSA, then the W-2 is correct and should not need to be overridden in TurboTax. 

[dgremler]

Unfortunately your understanding of the situation is not quite correct.  My employer contributed $1,000 to my HSA.  I contributed an additional amount (for purposes here, let's say it was $3,000).  My W-2 has BOTH listed int Box 12; that is, $4,000 is being reported in Box 12 (with a code of W).  So, the amount reported on my W-2 includes both what I contributed AND what my employer contributed. 

According to my monthly pay stub, MY contribution to the HSA is indeed "Pre-tax contributions"  and amounted to $3,000 in 2021.  I never see this money, as my HSA contribution is automatically withdrawn from my pay each month.  And, my pay stub indicates that my employer contributed only $1,000 to my HSA in 2021.

With that said, what SHOULD be the amount included on my form 8889?  That is, in TurboTax this 9A entry (on form 8889) is asking for "the employer contributions reported in Box 12 of Form W-2 (code W)".  As I read this question, the answer seems to me to be $1,000.  That is the amount my EMPLOYER contributed in 2021.  I contributed an additional $3000.  So, it makes sense to me to override the $4,000 (reported on my W-2) with $1,000 (the actual amount my employer contributed).  But, as I mentioned, TurboTax does not appear to like it that I put $1,000 in that (9A) entry.

Can you further enlighten me?

Thanks.

[RaifH]

Box 12 of your W-2 includes both the employer and payroll contributions. I would not override the amount reported if it looks correct for the total contributions made to the HSA. Line 9 on Form 8889 should be the same amount as Box 12 Code W on your W-2 and consist of both employer contributions and pre-tax payroll contributions. 

The IRS considers employer contributions to include salary reductions through a cafeteria plan. 

[thisisfutile]

@RaifH Can we carry this thread one step further?  Unlike OP, I do contribute to my HSA with after-tax dollars ($6000).  I do not have a "W' in Box 12 on my W-2.  Does this mean the $6K can be a deduction on my Ohio taxes?  I've been doing this for 5 years (5-6K into an HSA after-tax) and I've never done this on my Ohio taxes because TaxAct doesn't suggest it (even though their audit process says, "Are you sure you're making after tax contributions...this is unusual").  Is TaxAct wrong?  Perhaps I should run my numbers through TT and see if you guys catch it.

[BillM223]

Making after-tax contributions to an HSA is perfectly normal, although I agree that more people contribute through their employer than not. This is because a direct after-tax contribution saves only on your federal income tax while contributions made through your employer save you on federal income tax, Social Security tax, and Medicare tax.

In fact many taxpayers mix contributions through their employer and direct contributions. They contribute most of the annual HSA contribution limit through their employer and then fine tune the contributions for the year with a direct contribution at the end. It's just not that unusual to see direct HSA contributions.

In 2021, direct HSA contributions can be found on line 13 of Schedule 1 (1040). This deduction reduces your Adjusted Gross Income. If Ohio starts with federal AGI (many states do), then the HSA deduction would flow automatically through to the state return.

[thisisfutile]

@BillM223, ok, that's what I thought.  Ohio does start with AGI so putting HSA contributions in again is like claiming it twice.  I wonder why TaxAct didn't flag this as a problem?

Thanks for the reply!